MTD for Income Tax: the bookkeeper's guide to the 2026 rollout

Making Tax Digital for Income Tax went live on 6 April 2026. For bookkeepers it is the biggest change to Self Assessment since Self Assessment itself: affected sole traders and landlords have moved from one tax return a year to four quarterly updates plus a year-end return, all kept in digital records and filed through software. This guide covers who is mandated and when, the deadlines now in force, the penalty rules (including the first-year easement), and a practical triage list for getting a client base ready for the April 2027 threshold drop. Every figure links to an official HMRC or UK Government source in the Sources section.

What changed on 6 April 2026

Under MTD for Income Tax (often shortened to MTD ITSA), mandated taxpayers must ^[1] :

• Keep digital records of self-employment and property income and expenses, in software or spreadsheets connected through bridging tools.
• Send quarterly updates of cumulative income and expense totals to HMRC through MTD-compatible software.
• Submit a year-end tax return through software, confirming the final position with accounting adjustments, reliefs, and any other income sources.

The annual Self Assessment return as a single yearly event is gone for this group. What replaces it is a rolling cycle: roughly every three months, the books need to be in a fit state to submit.

Who is mandated, and when

Mandation is phased over three years, and each phase is tested against the tax return filed two years earlier ^[1] :

Two details catch people out:

1. Qualifying income is gross, not net. It is turnover from self-employment plus gross property income before any expenses or allowances. A heavily loss-making trade can still be mandated.
2. Sources are combined. Self-employment and property income are added together. A client with £28,000 of rent and a £25,000 side trade crosses £50,000 even though neither source alone does.

HMRC reviews each Self Assessment return and writes to taxpayers who cross the threshold, but the obligation does not depend on receiving the letter ^[1] . Partnerships and limited companies are not in scope yet; HMRC has committed to extending MTD to partnerships at an unconfirmed future date.

The quarterly cycle and its deadlines

Each quarterly update is a submission of cumulative income and expense totals per income source. The standard quarters follow the tax year ^[2] :

Clients whose books run on calendar months can elect calendar update periods (1 April to 30 June and so on) in their software before the first update of the year; the deadlines stay the same, and the election cannot change mid-year ^[2] .

Because updates are cumulative, each submission covers from the start of the tax year to the end of the period, not just the latest three months ^[2] . That is a quiet blessing for bookkeepers: an error discovered in Q1 does not need a resubmission, it is simply corrected in the records and flows through the next update.

The year-end position is unchanged in its timing: the tax return, with accounting and tax adjustments, other income, and reliefs, is still due by 31 January after the tax year, and payment deadlines (31 January balancing payment, 31 January and 31 July payments on account) are untouched.

Penalties: points, £200, and the first-year easement

MTD for Income Tax brings mandated taxpayers into the points-based late submission regime that VAT has used since 2023 ^[3] :

• Each late submission earns one penalty point.
• At the points threshold, a £200 penalty applies, and each further late submission while at the threshold triggers another £200.
• Points expire after a sustained period of on-time compliance.

For the 2026-27 tax year only, HMRC has confirmed an easement: no penalty points will be issued for late submission of the first four quarterly updates for taxpayers who joined in April 2026 ^[4] . Two sharp edges on that easement:

• It does not cover the 2026-27 year-end return, due 31 January 2028, which carries penalties as normal ^[4] .
• It applies to the 2026-27 year, not to “anyone’s first year”. A client mandated from April 2027 at the £30,000 threshold gets no equivalent grace ^[4] .

Quarterly updates also gate the year end: the return for the year cannot be submitted until the updates are in ^[4] .

Exemptions

A taxpayer can apply for exemption if it is not reasonable or practical for them to use software, for reasons such as age, disability, location (no reliable internet), or religious belief (digital exclusion) ^[1] . Exemption is by application to HMRC, not self-assessment, and clients already exempt from MTD for VAT are generally exempt without applying. The default assumption for a typical trading client should be that no exemption applies.

A triage list for the 2027 threshold drop

The £30,000 threshold lands in April 2027 and will pull in far more clients than the first phase, typically smaller, messier, and more paper-based. A workable triage between now and then:

1. Segment the client list by qualifying income from 2025-26 figures as they come in: over £30,000 mandated April 2027, £20,000 to £30,000 mandated April 2028, below £20,000 currently out of scope.
2. Move record-keeping digital now, one quarter before mandation is too late. Receipts, invoices, and mileage need a capture habit, not a January shoebox.
3. Pick the filing software per client. Xero and QuickBooks Online both carry MTD ITSA submission support; the choice mostly follows where the client’s books already live.
4. Set the quarter type deliberately. Calendar quarters suit clients whose books reconcile monthly; standard tax-year quarters avoid the 1 to 5 April overlap adjustment.
5. Reprice the engagement. Four submission events plus a year-end is a different workload to one return. Most practices are moving these clients to monthly or quarterly fixed fees.

Where ExpenseFlow fits

MTD compliance lives or dies on the quality of the underlying records, and the records are where the time goes. ExpenseFlow captures client receipts and invoices as they happen (snapped, emailed, or picked from a drive), extracts the data, codes each line with the right category and tax treatment, and syncs it into Xero or QuickBooks Online with the source document attached. By the time a quarterly update is due, the period’s expenses are already in the ledger, coded and evidenced, instead of arriving as a carrier bag in week 12. ExpenseFlow does not file the updates or the return; it makes the four-times-a-year scramble before them stop being a scramble.